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Virgin and HMV Fly the Flag for Subscriptions

So finally the big hitters come into the UK market: HMV and Virgin have (re)entered the digital music fray. As I’ve been saying for years in numerous Jupiter reports, the traditional music retailers will be major players once they finally decide to enter the market in a meaningful way. Some have raised doubts about why both left it so late to join the party. The bottom line is that they haven’t left it so late. The digital music market is only just starting. Both Virgin and HMV have timed their entry carefully, waiting for the cross over point between large enough opportunity to generate ROI
versus large enough cannibalistic impact / threat from iTunes et al.

For me, the most significant part of the launches is that both retailers are putting their weight behind music subscriptions. A la carte is an easier concept for consumers to get their heads around and as iTunes has shown there is solid near term demand. However, a la carte stores only use the Internet to a fraction of its potential, mirroring CD retailing whereas subscriptions mirror CD retailing, radio, MTV, NME and your mate who tells you about the best new bands all rolled into one. In addition to being a superior consumer proposition, it’s a great way for HMV and Virgin to differentiate from iTunes…and that is a big big asset. Until digital downloading, music retailers greatest competition for selling music came from music clubs, which were never much of a threat in the UK and supermarkets (a much bigger threat). Once Apple et al came into play they did so by stealing HMV’s and Virgin’s traditional customer base. So these launches are primarily a defensive strategy, but the focus on subscriptions – which have much chance if generating incremental spending – could turn them into offensive strategies too.

A slightly ironic post script to this: the link to the old Virgin Megastores Download service says that it has now closed and suggests that if you want to download music you should try iTunes…